NEW: Valuation Charting Tool

Hope you had a nice weekend!

As we transition into fall, market remain elevated, and many of us are wondering how today's valuations stack up in this uncertain environment.

Given this backdrop, I'm especially excited to introduce a new tool designed to help you better gauge if a stock could be over- or undervalued.

Until today, we had a metric called Timeliness that compared a stock's current dividend yield to its 5-year average yield to assess its valuation.

As an income investor, I liked the simplicity of this approach. But it wasn't always useful for stocks with smaller payouts or significant dividend changes. And it wasn't clear just how overvalued or undervalued a stock was, making the insight less actionable.

Our new Valuation tool addresses these issues but embraces the same principles - namely that stock prices follow earnings and dividends in the long run, and many mature dividend stocks trade at persistent valuation multiples over time.

This tool isn't an attempt to recommend fair values or set rigid price targets that give a false sense of precision. Instead, it's designed to help you think and make better informed investment decisions.

On stock pages, you'll now see a Valuation section with an interactive chart showing a company's stock price in grey and a blue band for the expected price range if shares traded 10% above or below their 5-year average P/E or dividend yield, depending on your selection.

The chart shows exactly what you would have seen in the past, using the dividends, analyst earnings estimates, and 5-year valuation multiples from that time. This gives you a clear view of each valuation signal's historical accuracy without any hindsight bias.

Chevron is a fun example to review. The oil giant's profits (and share price) swing unpredictably any given year, but its dividend has been safe for over a century and represented a good bogey for the company's sustainable earnings power.

When energy prices plunged during the pandemic, Chevron's stock tanked. But we maintained the firm's Safe Dividend Safety Score, and its Expected Price band tied to the stock's 5-year average dividend yield would have remained stable - and nearly double CVX's price at the time.

In late 2020, Warren Buffett initiated a position in Chevron. Less than two years later, the company's stock price had more than rebounded back to its Expected Price range, where it remains today (until the next investor panic that has little to do with long-term fundamentals).

If you aren't a Simply Safe Dividends member, it's free to sign up and give this tool (and others, like our dividend tracker) a try:

The Timeliness column has been renamed to Valuation.

The Valuation column contains the signal produced by the valuation method (dividend yield or P/E ratio) that we think will be the most reliable for each company.

Our analyst team reviewed over 1,000 stocks one by one to determine whether P/E ratios or dividend yields were a more reliable valuation indicator for each company. (We chose between dividend yield and NAV for closed-end funds.)

Those assignments power the Expected Prices you see in the Valuation column, which can be added to your portfolio's holdings table and others across the site.

The Timeliness report has been renamed Valuation. The content is all the same, with exception of a Valuation column replacing Timeliness.

Many of the signals remain the same (but now with expected prices shown) since plenty of stocks continue using their 5-year average dividend yields. For the others, we've deemed P/E ratios to be a more useful signal of value.

If you export data from your portfolio or other tables, please note that the Timeliness column has been replaced by Valuation, and we've added two columns to the middle of the file (sorry for any disruption - we try to minimize these types of changes):

All other columns, including Timeliness-related fields such as "5-Year Average Dividend Yield" and "% Above 5-Year Average Dividend Yield", remain available.

Just like with Timeliness, you can filter for ideas in the screener using the new Valuation metric. Again, the main difference is that some stocks will now use P/E ratio as their primary valuation signal rather than yield.

Our team had a lot of fun working on this project over the last few months, and I hope you find the valuation charts as thought-provoking as I have.

As always, please don't hesitate to reach out with any feedback or questions. Thank you for your support!

Best,

Brian Bollinger

Partner, Simply Safe Dividends